A man builds a house, it is a beautiful, on top of a cliff overlooking the sea. He engages the best architect to prepare the drawings, his wife enthuses about the colour scheme, curtains and carpets, he shows his friends, work colleagues and advisers. The building is the pinnacle of his success, the house of his dreams, the place where his children will go and remember what he did for them. Then one day an elderly structural engineer says gently ‘Of course you realize that the cliff is falling into the sea; your house will be gone in twenty years!’
The underpinnings of a family business empire, like the foundations of a house, need to last for many generations, but - most are rotten with the seeds of nightmares. These business empires are destined to fall into the sea of litigation, high taxation, poor investments, family infighting and dissipation, before the founder’s grandchildren reach middle age. Most often the seeds of destruction stem from some form of professional fugazi. Advice which better serves the adviser than the client (see Matthew McConaughey in Wolf of Wall Street).
The founder of a business empire needs to find an adviser which is looking after his best interests; not his own pocket, what we call ‘A Culture of Care’. A family office is on the side of the client and fights fugazi on his behalf.
Samir came to GFOS for a wealth ownership structure for his business empire which would survive the test of time and give him and his team control over his assets when in trust. It was a brilliant structure – and one I use a lot now. We were working day and night to perfect it. But what neither of us had anticipated was that a former business partner was to serve a legal claim against him for fraud. If we had known, we would have transferred all his assets into a trust immediately and perfected the structure later; at least then his assets would have been protected, but they were not.
Samir had to abandon his wealth ownership planning to fight the litigation. It took five years of his life and absorbed him completely. His business suffered, his reputation was questioned in the press and the pressure took its toll on his family. A wealth ownership structure is not therefore a ‘nice to have’; if you value your business, your reputation and family harmony – it is a ‘must have’ and time is of the essence. Perfection can come later.
Moises was another client. A resident of Brazil, he set up a trust for his worldwide empire with ABC Trustees Limited as the trustee. His lawyer advised him to write a detailed letter of wishes which set out his philosophy; who should receive what and when, and reserved extensive powers to himself, as Protector of the trust. Moises wondered why he was spending so much money on a letter which was not binding, and why the trustees were being paid so much, when in effect he was making all the decisions, but his lawyer seemed not to be bothered, so he did not ask.
As Moises got older, he fell out with his son Andre, and ABC Trustees at the insistence of Moises, removed him as a beneficiary. Andre was furious, so he took advice and was told that he could have the trust put aside as a sham, Moises had too much control. Moises sought advice from GFOS.
‘I cannot believe that I have spent so much on a structure which is worse than useless!’ he exploded ‘I made it very clear to my lawyer, that the last thing I want is debilitating litigation against a family member, which could damage my business, and get splattered all over the press – my wife wouldnot tolerate it –she would divorce me!’
I explained to Moises, that all was not lost; he could have control, but not through the trust, he could ensure that his son did not benefit for as long or as short as he wanted, but not through a letter of wishes and he could protect the structure from litigation.
To do so, I told Moises, would take an initial six weeks for GFOS to scope out the problem and a further two weeks to write a report. This would set out the problems, recommendations and detail as to implementation. We estimated that to implement the basic structure would take a further two months.
Moises was delighted, we saved his business empire from a sea of litigation, replaced his complex and unworkable structure with one which put him and his team of advisers in the driving seat, protected matrimonial harmony and protected the structure from litigation.
At GFOS our ethos is; a Culture of Care, but we are also not afraid to find solutions for our clients. The great monster on the horizon is the erosion of privacy. As from September 2017, financial information is to be exchanged by many countries across the world and in most cases relates to their financial position as of 2016.
As sensitive information reaches more hands, the greater is the likelihood of it being sold to interested parties; former employees, estranged spouses, business colleagues, spendthrift family members, the press - not to mention crooks, blackmailers, kidnappers and thieves. GFOS has solutions; – but time is of the essence. By 2018, the only relevant information you want reported is that the account was closed in 2017.
If you have a business empire or substantial wealth which you do not want to fall into a sea of litigation, you need to act now. Time is of the essence. Dithering could be the most expensive waste of time in your life.
To contact Caroline:
E mail: svetlana@garnhamfos.com
Telephone: Svetlana 020 3740 7423.
Caroline’s book, ‘When you are Super Trust who can you Trust?’ can be bought from Amazon, or direct from Svetlana.